CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

In 2011, a portfolio with 6 stocks had the following total return rates in percentages:

27.98%, 44.94%, 54.53%, -52.68%, 10.21%, 0.50%

The average return rate for this portfolio was 4.92% and the standard deviation was 37.66%. How confident are you that the return rates will fall within -51.57% and 61.41%?
A. 56%
B. 75%
C. 85%
Explanation: -51.57% is 1.5 standard deviations below the mean and 61.41% is 1.5 standard deviations above the mean. Therefore, we are confident that 1 - 1/1.52 = 56% of the return rates will fall within the specified range (Chebyshev's inequality).

User Contributed Comments 5

User Comment
linr0002 No of stdev= (61.41-4.92)/37.66=1.5,
1-1/(1.5)^2=0.56
labsbamb K= (X-(X))/std -------> 1.5
1-(1/K*K)= 56%
shiva5555 I thought 68 percent of observations would be within one standard deviation?
soukhov shiva5555 there is usefull comments in LOS, chek it
hiyujie Shiva5555, 68% of observation within one standard deviation is for normal distributed sample.
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